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CHAPTER 8 Intellectual Property and Cyberpiracy

Copyright

The owners of copyright material such as books, movies, CDs, DVDs, and video games; the owners of trademarks such as McDonald’s Corporation and Starbucks Corporation; the creators of patents such as Microsoft Corporation and Intel Corporation; the owners of trade secrets such as the Coca-Cola Corporation; and the owners of other intellectual property lose substantial revenues caused by the sale of knockoffs of their intellectual property. Computers and software programs have helped increase cyberpiracy of intellectual property. Intellectual property is protected by a variety of civil and criminal laws.

Learning Objectives

After studying this chapter, you should be able to:

1. Describe the business tort of misappropriating a trade secret.

2. Describe how an invention can be patented under federal patent laws and the penalties for patent infringement.

3. List the items that can be copyrighted and describe the penalties of copyright infringement.

4. Define trademark and service mark and describe the penalties for trademark infringement.

5. Define cyberpiracy and describe the penalties for engaging in cyber-infringement of intellectual property rights.

Chapter Outline

1. Introduction to Intellectual Property and Cyberpiracy

2. Intellectual Property

3. Trade Secret

1. ETHICS • Coca-Cola Employee Tries to Sell Trade Secrets to Pepsi-Cola

4. Patent

1. Case 8.1 • U.S. SUPREME COURT CASE • Association for Molecular Pathology v. Myriad Genetics, Inc.

2. Case 8.2 • U.S. SUPREME COURT CASE • Alice Corporation v. CLS Bank International

5. Copyright

1. CASE 8.3 • Broadcast Music, Inc. v. McDade & Sons, Inc.

2. Case 8.4 • U.S. SUPREME COURT CASE • American Broadcasting Companies, Inc. v. Aereo, Inc.

3. CASE 8.5 • Faulkner Literary Rights, LLC v. Sony Pictures Classics, Inc.

4. DIGITAL LAW • Digital Millennium Copyright Act

6. Trademark

1. ETHICS • Knockoff of Trademark Goods

7. Dilution

1. Case 8.6 • V Secret Catalogue, Inc. and Victoria’s Secret Stores, Inc. v. Moseley

2. GLOBAL LAW • International Protection of Intellectual Property

“ The Congress shall have the power . . . to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

Where a new invention promises to be useful, it ought to be tried.

Thomas Jefferson

—Article 1, Section 8, Clause 8 of the U.S. Constitution

Introduction to Intellectual Property and Cyberpiracy

The U.S. economy is based on the freedom of ownership of property. In addition to real estate and personal property, intellectual property rights have value to both businesses and individuals. This is particularly the case in the modern era of the information age, computers, and the Internet.

Federal law provides protections for intellectual property rights, such as patents, copyrights, and trademarks. Certain federal statutes provide for either civil damages or criminal penalties, or both, to be assessed against infringers of patents, copyrights, and trademarks. Trade secrets form the basis of many successful businesses, and such trade secrets are protected from misappropriation. State law imposes civil damages and criminal penalties against persons who misappropriate trade secrets.

This chapter discusses trade secrets, patents, copyrights, and trademarks and how to protect them from infringement, misappropriation, and cyberpiracy.

And he that invents a machine augments the power of a man and the well-being of mankind.

Henry Ward Beecher

Proverbs from Plymouth Pulpit (1887)

Intellectual Property

Intellectual property is a term that describes property that is developed through an intellectual and creative process. Intellectual property falls into a category of property known as intangible rights, which are not tangible physical objects.

intellectual property

Patents, copyrights, trademarks, and trade secrets. Federal and state laws protect intellectual property rights from misappropriation and infringement.

Most persons are familiar with the fact that intellectual property includes patents, copyrights, and trademarks. It also includes trade secrets. For patents, think of Microsoft’s patents on its operating system. Microsoft has obtained more than 10,000 patents. For copyrights, think of music, movies, books, and video games. Nike’s slogan “Just Do It” and Swoosh logo, and McDonald’s Big Mac and “I’m lovin’ it”are recognizable trademarks.For trade secrets, think of Coca-Cola Company’s secret recipe for making Coca-Cola. Patents, trademarks, and copyrights give their owners or holders monopoly rights for specified periods of time. Trade secrets remain valuable as long as they are not easily discovered.

Intellectual property is of significant value to companies in the United States and globally as well. Over one-half of the value of large companies in the United States is related to their intangible property rights. Some industries are intellectual property–intensive, such as the music and movie industries. Other industries that are not intellectual property–intensive, such as the automobile and food industries, are still highly dependent on their intellectual property rights.

Because of their intangible nature, intellectual property rights are more subject to misappropriation than is tangible property. It is almost impossible to steal real estate, and it is often difficult to steal tangible property such as equipment, furniture, and other personal property. However, intellectual property rights are much easier to misappropriate. Think of illegally downloaded copyrighted music, movies, and video games, and fake designer purses. In addition, computers and cyberpiracy make it easier to steal many forms of intellectual property. The misappropriation of intellectual property rights is one of the major threats to companies today.

Trade Secret

Many businesses are successful because their trade secrets set them apart from their competitors. Trade secrets may be product formulas, patterns, designs, compilations of data, customer lists, or other business secrets. Many trade secrets do not qualify to be—or simply are not—patented, copyrighted, or trademarked. Many states have adopted the Uniform Trade Secrets Act to give statutory protection to trade secrets.

trade secret

A product formula, pattern, design, compilation of data, customer list, or other business secret.

State unfair competition laws allow the owner of a trade secret to bring a lawsuit for misappropriation against anyone who steals a trade secret. For the lawsuit to be actionable, the defendant (often an employee of the owner or a competitor) must have obtained the trade secret through unlawful means, such as theft, bribery, or industrial espionage. No tort has occurred if there is no misappropriation.

The owner of a trade secret is obliged to take all reasonable precautions to prevent that secret from being discovered by others. If the owner fails to take such actions, the secret is no longer subject to protection under state unfair competition laws. Precautions to protect a trade secret may include fencing in buildings, placing locks on doors, hiring security guards, and the like.

Examples

The most famous trade secret is the formula for Coca-Cola. This secret recipe, which is referred to by the code name Merchandise 7X, is kept in a bank vault in Atlanta, Georgia. The formula is supposedly known by only two executives who have signed nondisclosure agreements. Another secret recipe that is protected as a trade secret is KFC’s secret recipe of 11 herbs and spices for the batter used on the Colonel’s Original Recipe Kentucky Fried Chicken.

Reverse Engineering

A competitor can lawfully discover a trade secret by reverse engineering (i.e., taking apart and examining a rival’s product or re-creating a secret recipe). A competitor who has reverse-engineered a trade secret can use the trade secret but not the trademarked name used by the original creator of the trade secret.

WEB EXERCISE

Go to www.usatoday.com/money/industries/food/2005-07-22-kfc-secret-recipe_x.htm and read about how KFC protects its secret recipe.

Example

An inventor invents a new formula for a perfume. The inventor decides not to get a patent for her new formula (because patent protection is good for only twenty years). Instead, the inventor chooses to try to protect it as a trade secret, which gives her protection for as long a period of time as she can successfully keep it a secret. Another party purchases the perfume, chemically analyzes it, and discovers the formula. The trade secret has been reverse-engineered, and the second party may begin producing a perfume using the inventor’s formula.

Misappropriation of a Trade Secret

The owner of a trade secret can bring a civil lawsuit under state law against anyone who has misappropriated a trade secret through unlawful means, such as theft, bribery, or industrial espionage. Generally, a successful plaintiff in a misappropriation of a trade secret action can (1) recover the profits made by the offender from the use of the trade secret, (2) recover for damages, and (3) obtain an injunction prohibiting the offender from divulging or using the trade secret.

Critical Legal Thinking

1. Why did the founders of the United States place protections for inventors and writers in Article I of the U.S. Constitution? Have these protections become even more important in the current digital age?

Economic Espionage Act

Congress enacted the federal Economic Espionage Act (EEA) , 1 which makes it a federal crime to steal another’s trade secrets. Under the EEA, it is a federal crime for any person to convert a trade secret to his or her benefit or for the benefit of others, knowing or intending that the act would cause injury to the owner of the trade secret. The definition of trade secret under the EEA is very broad and parallels the definition used under the civil laws of misappropriating a trade secret.

Economic Espionage Act

A federal statute that makes it a crime for any person to convert a trade secret for his or her own or another’s benefit, knowing or intending to cause injury to the owners of the trade secret.

One of the major reasons for the passage of the EEA was to address the ease of stealing trade secrets through computer espionage and use of the Internet. Confidential information can be downloaded onto a flash drive, placed in a pocket, and taken from the legal owner. Computer hackers can crack into a company’s computers and steal customer lists, databases, formulas, and other trade secrets. The EEA is a very important weapon in addressing computer and Internet espionage and penalizing those who commit it.

The EEA provides severe criminal penalties. The act imposes prison terms on individuals of up to 15 years per criminal violation. An organization can be fined up to $10 million per criminal act. The criminal prison term for individuals and the criminal fine for organizations can be increased if the theft of a trade secret was made to benefit a foreign government.

The following ethics feature discusses the misappropriation of a trade secret.

Ethics Coca-Cola Employee Tries to Sell Trade Secrets to Pepsi-Cola

“What if you knew the markets Coca-Cola was going to move into and out of and beat them to the punch.”

—Letter to PepsiCo

PepsiCo received a letter sent to the company by an employee of Coca-Cola Company that offered to sell PepsiCo trade secrets of Coca-Cola. The letter stated, “What if you knew the markets Coca-Cola was going to move into and out of and beat them to the punch.” The letter proposed selling trade secrets regarding a proposed Coke product code-named Project Lancelot for $1.5 million.

PepsiCo notified Coca-Cola officials and federal authorities. The Federal Bureau of Investigation (FBI) initiated an investigation into the matter. The federal government brought criminal charges against Coca-Cola secretary Joya Williams. During trial, prosecutors produced the letter as well as a video-recording of Williams putting confidential documents and samples of Coke products that were still in development into her bag.

Williams was convicted by a federal jury of conspiring to steal Coca-Cola trade secrets and attempting to sell them to archrival PepsiCo. The trial court judge sentenced Williams to 8 years in jail. The U.S. court of appeals upheld the decision. Two other co-conspirators were arrested and pled guilty. United States v. Williams, 526 F.3d 1312, 2008 U.S. App. Lexis 6073 (United States Court of Appeals for the Eleventh Circuit, 2008)

Ethics Question 

1. Did Williams act loyally in this case? Did PepsiCo do what it was supposed to do in this case? How likely is it that PepsiCo would have paid Williams and her co-conspirators the money they demanded?

Patent

When drafting the Constitution of the United States of America, the founders of the United States provided for protection of the work of inventors and writers. Article I, Section 8 of the Constitution provides, “The Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Pursuant to the express authority granted in the U.S. Constitution, Congress enacted the Federal Patent Statute of 1952 to provide for obtaining and protecting patents. 2

Federal Patent Statute

A federal statute that establishes the requirements for obtaining a patent and protects patented inventions from infringement.

A patent is a grant by the federal government to the inventor of an invention for the exclusive right to use, sell, or license the invention for a limited amount of time.

patent

A grant by the federal government to the inventor of an invention for the exclusive right to use, sell, or license the invention for a limited amount of time.

Patent law is intended to provide an incentive for inventors to invent and make their inventions public and to protect patented inventions from infringement. Federal patent law is exclusive; there are no state patent laws. Applications for patents must be filed with the U.S. Patent and Trademark Office (PTO) in Washington DC. The PTO grants approximately 250,000 patents each year.

U.S. Court of Appeals for the Federal Circuit

The U.S. Court of Appeals for the Federal Circuit in Washington DC, was created in 1982. This is a special federal appeals court that hears appeals from the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office and U.S. district courts concerning patent issues. This court of appeals was created to promote uniformity in patent law.

U.S. Court of Appeals for the Federal Circuit

A special federal appeals court that hears appeals from the Board of Patent Appeals and Interferences and federal court concerning patent issues.

Patent Application

To obtain a patent, a patent application must be filed with the PTO in Washington DC. The PTO provides for the online submission of patent applications and supporting documents through its EFS-Web system. A patent application must contain a written description of the invention. Patent applications are complicated. Therefore, an inventor should hire a patent attorney to assist in obtaining a patent for an invention.

The PTO must make a decision whether to grant a patent within three years from the date of filing a patent application. For the payment of approximately $5,000, inventors can move their patent application to the top of the list of other patent applications for review by the PTO and receive an answer within one year. The PTO can grant priority to patent applications for products, processes, or technologies that are important to the national economy or national competiveness.

The patent system added the fuel of interest to the fire of genius.

Abraham Lincoln

An inventor may file a provisional application with the PTO. This provisional right gives an inventor 3 months to prepare and file a final and complete patent application.

provisional application

An application that an inventor may file with the PTO to obtain 3 months to prepare a final patent application.

Third parties may file a pre-issuance challenge to a pending patent application by submitting prior art references that assert that the sought-after patent is not patentable. There is also a nine-month period after the issuance of a patent for a third party to seek post-grant review of a patent by submitting prior art references and other information that assert that the patent holder’s claim is not patentable.

The Patent Trial and Appeal Board (PTAB) , a section within the PTO, reviews adverse decisions by patent examiners, reviews reexaminations, conducts post-grant reviews, and conducts other patent challenge proceedings. By permitting pre-issuance and post-grant challenges within the PTO, the law attempts to have disputes resolved within the PTO before reaching the litigation stage.

Patent Number

If a patent is granted, the invention is assigned a patent number . Patent holders usually affix the word patent or pat. and the patent number on the patented article. A patent holder may mark an item “Patent” or “Pat” and direct a party to a freely accessible Web address that identifies the product covered by the patent number. If a patent application is filed but a patent has not yet been issued, the applicant usually places the words patent pending on the article.

Exhibit 8.1 shows the abstract from the patent application for the Facebook social networking system (U.S. Patent 20070192299).

Systems and Methods for Social Mapping Abstract

A system, method, and computer program for social mapping is provided. Data about a plurality of social network members is received. A first member of the plurality of social network members is allowed to identify a second member of the plurality of social network members with whom the first member wishes to establish a relationship. The data is then sent to the second member about the first member based on the identification. Input from the second member is received in response to the data. The relationship between the first member and the second member is confirmed based on the input in order to map the first member to the second member.

Exhibit 8.1 Patent Application for the Facebook Social Networking System

Subject Matter That Can Be Patented

Most patents are utility patents ; that is, they protect the functionality of the item. The term patent is commonly used in place of the words utility patent. Only certain subject matter can be patented. Federal patent law recognizes categories of innovation that can be patented, including:

utility patent

A patent that protects the functionality of the invention.

· Machines

· Processes

· Compositions of matter

· Improvements to existing machines, processes, or compositions of matter

· Designs for an article of manufacture

· Asexually reproduced plants

· Living material invented by a person

Patent law prohibits the issuance of a patent encompassing a human organism. The law also bans the ability to patent tax strategies. Abstractions and scientific principles cannot be patented unless they are part of the tangible environment.

Example

Einstein’s theory of relativity (E = mc 2) cannot be patented.

For centuries, most patents involved tangible inventions and machines, such as the telephone and the lightbulb. Next, chemical and polymer inventions were patented. Then biotechnology patents were granted. More recently, subject matter involving the computer, Internet, and e-commerce has been added to what can be patented.

Requirements for Obtaining a Patent

To be patented, an invention must be (1) novel, (2) useful, and (3) nonobvious. An invention must meet all three of these requirements. If an invention is found not to meet any one of these requirements , it cannot be patented:

requirements for obtaining a patent

To be patented, an invention must be (1) novel, (2) useful, and (3) nonobvious.

1. Novel. An invention is novel if it is new and has not been invented and used in the past. If an invention has been used in “prior art,” it is not novel and cannot be patented.

Example

College and professional football games are often shown on television. It is often difficult, however, for a viewer to tell how far the offensive team must go to get a first down and keep possession of the football. Inventors invented a system whereby a yellow line is digitally drawn across the football field at the distance that a team has to go to obtain a first down. This yellow line qualified for a patent because it was novel.

2. Useful. An invention is useful if it has some practical purpose. If an invention has only theoretical benefit and no useful purpose, it cannot be patented.

Example

A cardboard or heavy paper sleeve that can be placed over the outside of a paper coffee cup so that the cup will not be too hot to hold serves a useful purpose. Many coffee shops use these sleeves. The sleeve serves a useful purpose and therefore qualifies to be patented.

3. Nonobvious. If an invention is nonobvious , it qualifies for a patent; if it is obvious, then it does not qualify for a patent.

Example

An invention called “Forkchops” was found to be nonobvious and was granted a patent. Forkchops consist of chopsticks with a spoon on one end of one of the chopsticks and a fork on one end of the other chopstick. Thus, when eating, a user can use either the chopstick ends or the spoon and fork ends.

Example

An inventor filed for a patent for a waffle fry, which is a fried slice of potato with a waffle shape that is not as thick as a typical french fry but is thicker than a potato chip. Thus, the thickness of a waffle fry is somewhere between the thickness of a french fry and a potato chip. The court rejected a patent for the waffle fry because it was obvious that a potato could be sliced into different sizes.

CONCEPT SUMMARY Requirements for Obtaining a Patent

1. Novel. An invention is novel if it is new and has not been invented and used in the past. If an invention has been used in “prior art,” it is not novel and cannot be patented.

2. Useful. An invention is useful if it has some practical purpose. If an invention has only theoretical benefit and no useful purpose, it cannot be patented.

3. Nonobvious. If an invention is nonobvious, it qualifies for a patent; if it is obvious, then it does not qualify for a patent.

The following U.S. Supreme Court case involves the question of what is patentable subject matter.

CASE 8.1 U.S. SUPREME COURT CASE Patent Association for Molecular Pathology v. Myriad Genetics, Inc.

133 S.Ct. 2107, 2013 U.S. Lexis 4540 (2013) Supreme Court of the United States

“Laws of nature, natural phenomena, and abstract ideas are not patentable.”

—Thomas, Justice

Facts

After substantial research and expenditure of money and resources, Myriad Genetics, Inc. (Myriad) discovered the precise location and sequence of two naturally occurring segments of deoxyribonucleic acid (DNA) known as BRCA1 and BRCA2. Mutations in these genes can dramatically increase a female’s risk of developing breast and ovarian cancer. The average American woman has a 12 to 13 percent risk of developing breast cancer, but in a woman with the genetic mutations discovered by Myriad, the risk can range between 50 and 80 percent for breast cancer and between 20 and 50 percent for ovarian cancer. Before Myriad’s discovery of the BRCA1 and BRCA2 genes, scientists knew that heredity played a role in establishing a woman’s risk of developing breast and ovarian cancer, but they did not know which genes were associated with those cancers. For women who are tested and found to have the dangerous mutations of BRCA1 and BRCA2, medical measures can be taken to reduce the risks of breast and ovarian cancer developing.

Myriad obtained a patent from the U.S. Patent and Trademark Office based on its discovery. The Association for Molecular Pathology sued Myriad, seeking a declaration that Myriad’s patent was invalid. The U.S. district court held that Myriad’s claim was invalid because it covered a product of nature and was therefore unpatentable. The Federal Circuit Court of Appeals held that the isolated DNA was patent eligible. The U.S. Supreme Court granted review.

Issue

Is a naturally occurring segment of DNA patent eligible?

Language of the U.S. Supreme Court

Laws of nature, natural phenomena, and abstract ideas are not patentable. It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes. Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.

Decision

The U.S. Supreme Court held that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. The U.S. Supreme Court reversed the decision of the Federal Circuit Court of Appeals on this issue.

Ethics Questions

1. Will the Supreme Court’s decision affect the amount of research that is conducted to find naturally occurring disease-causing DNA sequences? Should Myriad be compensated by the government for its research costs?

Patent Period

In 2011, Congress passed the Leahy-Smith America Invents Act (AIA). 3 The act stipulates a first-to-file rule for determining the priority of a patent. This means that the first party to file a patent on an invention receives the patent even though some other party was the first to invent the invention. Previously, the United States followed the first-to-invent rule whereby the party that first invented the invention was awarded the patent even if another party had previously filed for and received the patent. The adoption of the first-to-file rule is a major change in U.S. patent law.

Leahy-Smith America Invents Act (AIA)

A federal statute that significantly amended federal patent law.

Utility patents for inventions are valid for 20 years. The patent term begins to run from the date the patent application is filed.

After the patent period runs out, the invention or design enters the public domain , which means that anyone can produce and sell the invention without paying the prior patent holder.

WEB EXERCISE

Go to www.uspto.gov . Go to the left column titled “Patents.” Click on number 2 “Search.” Toward the middle of the page that appears, find the term “Patent Number Search.” Click on this term. In the open line under the term “Query,” type in the patent number 3741662. Click on the term “Search.” Read the information about this patent.

Example

On January 12, 2016, an inventor invents a formula for a new prescription drug. On March 1, 2016, the inventor files for and is eventually granted a 20-year patent for this invention. Twenty years after the filing of the patent application, on March 1, 2036, the patent expires. The next day the patent enters the public domain, and anyone can use the formula to produce exactly the same prescription drug.

In the following case, the U.S. Supreme Court had to decide whether a financial model was patentable.

CASE 8.2 U.S. SUPREME COURT CASE Patent Alice Corporation v. CLS Bank International

134 S.Ct. 2347, 2014 U.S. Lexis 4303 (2014) Supreme Court of the United States

“The abstract ideas category embodies the longstanding rule than an idea itself is not patentable.”

—Thomas, Justice

Facts

Alice Corporation owns several patents that use computers to calculate the intermediated settlement risk that a party to an agreed-upon financial exchange will satisfy its obligation. CLS Bank International, which operates a network that facilitates financial transactions, filed a lawsuit against Alice Corporation seeking a declaratory judgment that Alice Corporation’s patents are invalid. The U.S. district court held that claims were patent ineligible because they merely use computers directed to the abstract idea of minimizing risk. The en banc U.S. court of appeals affirmed the judgment. Alice Corporation appealed to the U.S. Supreme Court.

Issue

Are the claims patent eligible, or are they patent ineligible abstract ideas?

Language of the U.S. Supreme Court

The abstract ideas category embodies the longstanding rule than an idea itself is not patentable. The concept of intermediated settlement is a fundamental economic practice long prevalent in our system of commerce. Viewed as a whole, petitioner’s method claims simply recite the concept of intermediated settlement as performed by a generic computer. Under our precedents, that is not enough to transform an abstract idea into a patent eligible invention.

Decision

The U.S. Supreme Court held that Alice Corporation’s claims of using generic computer implementation adds nothing of substance to the underlying abstract idea of intermediate settlement and are therefore patent ineligible.

Ethics Questions

1. Do companies sometimes overreach in their patent claims? Why do they do this?

Patent Infringement

Patent holders own exclusive rights to use and exploit their patents. Patent infringement occurs when someone makes unauthorized use of another’s patent. Patent infringement claims must be brought in the U.S. district court that has jurisdiction to hear the case. Patent decisions of the U.S. district courts can be appealed to the U.S. Court of Appeals for the Federal Circuit.

patent infringement

Unauthorized use of another’s patent. A patent holder may recover damages and other remedies against a patent infringer.

In a suit for patent infringement, a successful plaintiff can recover (1) money damages equal to a reasonable royalty rate on the sale of the infringed articles, (2) other damages caused by the infringement (e.g., loss of customers), (3) an order requiring the destruction of the infringing article, and (4) an injunction preventing the infringer from such action in the future. The court has the discretion to award up to treble damages if the infringement was intentional. It costs between several hundred thousand dollars to several million dollars to bring an infringement case to trial.

Design Patent

In addition to utility patents, a party can obtain a design patent. A design patent is a patent that may be obtained for the ornamental nonfunctional design of an item. A design patent is valid for 14 years.

design patent

A patent that may be obtained for the ornamental nonfunctional design of an item.

Examples

The design of a chair, a door knob, a perfume bottle, and the outside of a computer are examples of design patents.

Statue of Liberty

The Statue of Liberty is one of the most famous design patents. It was patented in the United States by Auguste Bartholdi on February 18, 1879. Patent No. 11,023.

Copyright

Article I, Section 8, of the Constitution of the United States of America authorizes Congress to enact statutes to protect the works of writers for limited times.

Pursuant to this authority, Congress has enacted copyright statutes that establish the requirement for obtaining a copyright. Copyright is a legal right that gives the author of qualifying subject matter and who meets other requirements established by copyright law the exclusive right to publish, produce, sell, license, and distribute the work.

copyright

A legal right that gives the author of qualifying subject matter, who meets other requirements established by copyright law, the exclusive right to publish, produce, sell, license, and distribute the work.

The Copyright Revision Act of 1976 currently governs copyright law. 4 The act establishes the requirements for obtaining a copyright and protects copyrighted works from infringement. Federal copyright law is exclusive; there are no state copyright laws. Federal copyright law protects the work of authors and other creative persons from the unauthorized use of their copyrighted materials and provides a financial incentive for authors to write, thereby increasing the number of creative works available in society. Copyrights can be sold or licensed to others, whose rights are then protected by copyright law.

Copyright Revision Act

A federal statute that (1) establishes the requirements for obtaining a copyright and (2) protects copyrighted works from infringement.

Tangible Writing

Only tangible writings —writings that can be physically seen—are subject to copyright registration and protection. The term writing has been broadly defined.

Examples

Books, periodicals, and newspapers; lectures, sermons, addresses, and poems; musical compositions; plays, motion pictures, and radio and television productions; maps; works of art, including paintings, drawings, jewelry, glassware, tapestry, and lithographs; architectural drawings and models; photographs, including prints, slides, and filmstrips; greeting cards and picture postcards; photoplays, including feature films, cartoons, newsreels, travelogues, and training films; and sound recordings published in the form of CDs and MP3 files qualify for copyright protection.

Registration of Copyrights

To be protected under federal copyright law, a work must be the original work of the author. A copyright is automatically granted the moment a work is created and fixed in tangible form.

Example

When a student writes a term paper for his class, he owns a copyright to his work.

In 1989, the United States signed the Berne Convention , an international copyright treaty. This law eliminated the need to place the symbol © or the word copyright or copr. on a copyrighted work. However, it is still advisable to place the copyright notice © , the year of publication, and the author’s name on many copyrighted works because it notifies the world that the work is protected by a copyright, identifies the owner of the copyright, and shows the year of its publication. This helps eliminate a defendant’s claim of innocent copyright.

Berne Convention

An international copyright treaty.

Example

Copyright © 2017 Henry Richard Cheeseman.

Published and unpublished works may be registered with the U.S. Copyright Office in Washington DC. Registration of a copyright is permissive and voluntary and can be effectuated at any time during the term of the copyright. Copyright registration creates a public record of the copyrighted work. A copyright registration certificate is issued to the copyright holder. Registration permits a holder to obtain statutory damages for copyright infringement, which may be greater than actual damages, and attorney’s fees.

Copyright Period

The Copyright Term Extension Act of 1998 extended copyright protection to the following: 5

The law in respect to literature ought to remain upon the same footing as that which regards the profits of mechanical inventions and chemical discoveries.

William Wordsworth

Letter (1838)

1. Individuals are granted copyright protection for their lifetime plus 70 years.

2. Copyrights owned by businesses are protected for the shorter of either:

a. 120 years from the year of creation, or

b. 95 years from the year of first publication

After the copyright period runs out, the work enters the public domain , which means that anyone can publish the work without paying the prior copyright holder.

Example

If an author publishes a novel on April 1, 2015, and lives until August 1, 2040, his heirs will own the copyright until August 1, 3010.

CONCEPT SUMMARY Copyright Period

Type of Holder

Copyright Period

Individual

Life of the author plus 70 years beyond the author’s life.

Business

The shorter of either 95 years from the year of first publication or 120 years from the year of

creation.

Civil Copyright Law: Copyright Infringement

Copyright infringement occurs when a party copies a substantial and material part of the plaintiff’s copyrighted work without permission. The copying does not have to be either word for word or the entire work. A plaintiff can bring a civil action against the alleged infringer and, if successful, recover (1) the profit made by the defendant from the copyright infringement, (2) damages suffered by the plaintiff, (3) an order requiring the impoundment and destruction of the infringing works, and (4) an injunction preventing the defendant from infringing in the future. The court, at its discretion, can award statutory damages for willful infringement in lieu of actual damages.

FBI Warning

The Federal Bureau of Investigation (FBI), a federal government agency, is authorized to investigate violations of copyright law. An FBI warning concerning copyright infringement usually appears at the beginning of a DVD and before a feature movie or television program is shown. The FBI warning was developed to deter illegal piracy and increase awareness of the criminal penalties associated with piracy.

copyright infringement

An infringement that occurs when a party copies a substantial and material part of a plaintiff’s copyrighted work without permission. A copyright holder may recover damages and other remedies against the infringer.

The federal government can bring criminal charges against a person who commits copyright infringement. Criminal copyright infringement, including infringement committed without monetary gain, is punishable by up to five years in federal prison.

In the following case, the court had to decide whether copyright infringement had occurred.

CASE 8.3 FEDERAL COURT CASE Copyright Infringement Broadcast Music, Inc. v. McDade & Sons, Inc.

928 F.Supp.2d 1120, 2013 U.S. Dist. Lexis 30211 (2013) United States District Court for Arizona

“The record reflects that defendants’ infringements were knowing and willful.”

—Bade, United States Magistrate Judge

Facts

Norton’s Country Corner (Norton’s) is a cowboy bar located in Queen Creek, Arizona. The bar is owned by McDade & Sons, Inc. which is owned 100 percent by Nancy McDade. McDade is its sole officer and director. Live bands play country and western music at Norton’s on various nights of the week. Certain copyright owners of music have authorized Broadcast Music, Inc. (BMI) to license the use of their copyright songs to broadcasters and to owners of concert halls, restaurants, and nightclubs for live performances of the copyrighted music. BMI attends public performances of music to determine whether any copyrights it is authorized to license are being performed without such license.

One night, a BMI representative attended a live band performance at Norton’s bar and recorded the songs played by the band that night. The audio recording showed that 13 copyrighted songs that BMI was authorized to license were played by the band at Norton’s without the required license. The songs included classics originally sung by famous artists, such as “All My Ex’s Live in Texas” (George Strait), “Baby Don’t Get Hooked on Me” (Mac Brown), “Brown Eyed Girl” (Van Morrison), and “Ring of Fire” (Johnny Cash). BMI sued McDade & Sons, Inc. and Nancy McDade in U.S. district court for trademark infringement. The defendants argued they had not committed trademark infringement and that trademark law did not apply to owners of small establishments.

Issue

Are the defendants liable for trademark infringement?

Language of the Court

The Copyright Act gives the owner of a copyright the exclusive right to publicly perform, or authorize others to perform, the copyrighted work. Any person who violates this exclusive right is an infringer. Lack of authorization is established by the undisputed fact that defendants were not licensed by BMI to perform plaintiffs’ copyrighted musical compositions. Defendants contend that the copyright laws are unfair to small bar owners “struggling to get by week by week.” Defendants seek an exemption from complying with the Copyright Act, but have not cited any authority for such an exemption. The record reflects that defendants’ infringements were knowing and willful.

Decision

The U.S. district court held that the defendants had engaged in copyright infringement and awarded $39,000 in damages, attorney’s fees, and costs to the plaintiffs, and issued a permanent injunction against the defendants’ infringement of copyrighted musical compositions licensed by Broadcast Music, Inc.

Ethics Questions

1. Should small-business owners of bars and other establishments be free from copyright laws? How many restaurants, bars, and other establishments play copyrighted music without the copyright owner’s permission?

The following case involves the issue of digital copyright infringement.

CASE 8.4 U.S. SUPREME COURT CASE Digital Copyright Infringement American Broadcasting Companies, Inc. v. Aereo, Inc.

134 S.Ct. 2498, 2014 U.S. Lexis 4496 (2014) Supreme Court of the United States

“The Copyright Act gives a copyright owner the exclusive right to perform the copyrighted work publicly.”

—Breyer, Justice

Facts

For a monthly fee Aereo, Inc. offers subscribers broadcast television programming over the Internet virtually as the programs are being broadcast on television. Most of the programming is made up of copyrighted works. Aereo’s system is made up of thousands of tiny dime-sized antennas housed in a central warehouse. A subscriber visits Aereo’s website and selects a television show that he or she wishes to watch which is currently being broadcast. One of Aereo’s thousands of small antennas is assigned to the subscriber, a server tunes the small antenna to the over-the-air broadcast carrying the show, and an Aero transcoder translates the signals into data that is then transmitted over the Internet to the subscriber’s digital device.

American Broadcasting Companies, Inc. and other television broadcasters, producers, marketers, distributers (petitioners) who own the copyrights to the programs Aereo streams sued Aereo for copyright infringement and sought an injunction against Aereo. Aereo argued that it does not perform the copyrighted programs publicly because it streams programs to each subscriber individually from tiny individual antennas. The U.S. district court denied the injunction and the U.S. court of appeals affirmed. The petitioners appealed to the U.S. Supreme Court.

Issue

Has Aereo engaged in copyright infringement?

Language of the U.S. Supreme Court

The Copyright Act gives a copyright owner the exclusive right to perform the copyrighted work publicly. We must decide whether Aereo infringes this exclusive right by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air. We conclude that it does.

Decision

The U.S. Supreme Court held that Aereo engaged in copyright infringement.

Ethics Questions

1. Why did Aereo use thousands of tiny dime-size antennas rather than using one big antenna to recover petitioners’ over-the-air broadcasts? Did Aereo act ethically in adopting this business model?

Fair Use Doctrine

A copyright holder’s right in a work is not absolute. The law permits certain limited unauthorized use of copyrighted materials under the fair use doctrine . The following uses are protected under this doctrine: (1) quotation of the copyrighted work for review or criticism or in a scholarly or technical work, (2) use in a parody or satire, (3) brief quotation in a news report, (4) reproduction by a teacher or student of a small part of the work to illustrate a lesson, (5) incidental reproduction of a work in a newsreel or broadcast of an event being reported, and (6) reproduction of a work in a legislative or judicial proceeding. The copyright holder cannot recover for copyright infringement where fair use is found.

fair use doctrine

A doctrine that permits certain limited use of a copyright by someone other than the copyright holder without the permission of the copyright holder.

Examples

Critical Legal Thinking

1. Has copyright infringement become endemic? Is illegal downloading of copyrighted music, movies, and video games “stealing”? Can copyright law and enforcement keep up with digital piracy?

A student is assigned to write a paper in class about a certain subject matter. The student conducts research and writes her paper. In her paper, the student uses two paragraphs from a copyrighted book and places these paragraphs in quotation marks and properly cites the source and author in a footnote. This is fair use for academic purposes. However, if the student copies and uses three pages from the book, this would not be fair use and would constitute copyright infringement whether she cites the author and his or her work in a footnote or not.

Example

A comedy television show that performs parodies and satires on famous celebrities is an example of parody fair use.

In the following case, the court addresses the doctrine of fair use.

CASE 8.5 FEDERAL COURT CASE Fair Use Faulkner Literary Rights, LLC v. Sony Pictures Classics, Inc.

953 F.Supp.2d 701, 2013 U.S. Dist. Lexis 100625 (2013) United States District Court for the Northern District of Mississippi

“The court considers it relevant that the copyrighted work is a serious piece of literature lifted for use in a speaking part in a movie comedy.”

—Mills, Chief District Judge

Facts

William Faulkner was a great American author who wrote novels, short stories, poetry, and screenplays, including the novels A Fable, The Reivers, As I Lay Dying, and The Sound and the Fury. Faulkner won the Noble Prize in Literature. One of Faulkner’s novels was Requiem for a Nun (Requiem), published in 1950, which is a murder mystery set in the South in which one of the main characters uses the famous line “The past is never dead. It’s not even past.” Faulkner died in 1962. Faulkner Literary Rights, LLC (Faulkner) owns the copyrights to Faulkner’s works. Woody Allen is an iconic American screenwriter, actor, playwright, and director who stars in many of his films, which have included Annie Hall, Manhattan, and Hannah and Her Sisters. Allen has been nominated 24 times for Academy Awards and has won three for best original screenplay and one for best director. One of his films, Midnight in Paris (Midnight), was released in 2011, for which Allen won the Academy Award for Best Original Screenplay. Midnight is a romantic comedy set in Paris, France, in which a major character says the line “The past is not dead! Actually, it’s not even past. You know who said that? Faulkner. And he was right.” The line lasts 8 seconds. Sony Pictures Classics, Inc. (Sony) produced and distributed Midnight and owns the copyright to the movie. Faulkner sued Sony for copyright infringement for using the paraphrased version of the famous line from Faulkner’s book Requiem in Allen’s movie Midnight. Sony defends, arguing that the use qualifies as fair use and is not copyright infringement.

Issue

Is the paraphrased use of Faulkner’s quote from his book Requiem in Allen’s movie Midnight fair use?

Language of the Court

At issue in this case is whether a single line from a full-length novel singly paraphrased and attributed to the original author in a full-length Hollywood film can be considered a copyright infringement. In this case, it cannot. The court considers it relevant that the copyrighted work is a serious piece of literature lifted for use in a speaking part in a movie comedy. Moreover, it should go without saying that the quote at issue is of miniscule quantitative importance to the work as a whole. The court is highly doubtful that any relevant markets have been harmed by the use in Midnight.

Decision

The U.S. district court held that Sony’s use of Faulkner’s paraphrased quotation from his book Requeim in the movie Midnight is de minimus (minimal) and fair use and not copyright infringement. The court dismissed the lawsuit.

Ethics Questions

1. What is the public policy behind the doctrine of fair use? Should Sony have voluntarily paid some money to Faulkner for the use of its copyrighted material?

Criminal Copyright Law: No Electronic Theft Act

In 1997, Congress enacted the No Electronic Theft Act (NET Act) , a federal statute that criminalizescertain copyright infringement. 6 The NET Act prohibits any person from willfully infringing a copyright for the purpose of either commercial advantage or financial gain, or by reproduction or distribution even without commercial advantage or financial gain, including by electronic means. Thus, the NET Act makes it a federal crime to reproduce, share, or distribute copyrighted electronic works including movies, songs, software programs, and video games.

No Electronic Theft (NET) Act

A federal statute that makes it a crime for a person to infringe willfully on a copyright.

Examples

Violations of the NET Act include distributing copyrighted works without permission of the copyright holder over the Internet, uploading such works to a website, and posting information about the availability of such uploaded electronic works.

Criminal penalties for violating the act include imprisonment for up to five years and fines of up to $250,000. Subsequent violators may be fined and imprisoned for up to 10 years. The creation of the NET Act adds a new law that the federal government can use to attack criminal copyright infringement and curb digital piracy.

The NET Act also permits copyright holders to sue violators in a civil lawsuit and recover monetary damages of up to $150,000 per work infringed.

The following feature discusses a federal law designed to protect digital copyright material.

Digital Law Digital Millennium Copyright Act

The Internet makes it easier than ever before for people to copy and distribute copyrighted works illegally. To combat this, software and entertainment companies have developed digital wrappers” and encryption technology to protect their copyrighted works from unauthorized access. Not to be outdone, software pirates have devised ways to crack these wrappers and protection devices.

Software and entertainment companies lobbied Congress to enact federal legislation to make the cracking of their wrappers and selling of technology to do so illegal. In response, Congress enacted the Digital Millennium Copyright Act (DMCA) , 7 a federal statute that does the following:

Digital Millennium Copyright Act (DMCA)

A federal statute that prohibits unauthorized access to copyrighted digital works by circumventing encryption technology or the manufacture and distribution of technologies designed for the purpose of circumventing encryption protection of digital works.

· Prohibits unauthorized access to copyrighted digital works by circumventing the wrapper or encryption technology that protects the intellectual property.

· Prohibits the manufacture and distribution of technologies, products, or services primarily designed for the purpose of circumventing wrappers or encryption technology protecting digital works.

Congress granted exceptions to DMCA liability to (1) software developers to achieve compatibility of their software with the protected work; (2) federal, state, and local law enforcement agencies conducting criminal investigations; (3) parents who are protecting children from pornography or other harmful materials available on the Internet; (4) Internet users who are identifying and disabling cookies and other identification devices that invade their personal privacy rights; and (5) nonprofit libraries, educational institutions, and archives that access a protected work to determine whether to acquire the work.

The DMCA imposes civil and criminal penalties.

Trademark

Businesses often develop company names, as well as advertising slogans, symbols, and commercial logos, to promote the sale of their goods and services. Companies such as Nike, Microsoft, Louis Vuitton, and McDonald’s spend millions of dollars annually promoting their names, slogans, symbols, and logos to gain market recognition from consumers. The U.S. Congress has enacted trademark laws to provide legal protection for these names, slogans, and logos.

A mark is any trade name, symbol, word, logo, design, or device used to identify and distinguish goods of a manufacturer or seller or services of a provider from those of other manufacturers, sellers, or providers.

mark

Any trade name, symbol, word, logo, design, or device used to identify and distinguish goods of a manufacturer or seller or services of a provider from those of other manufacturers, sellers, or providers.

WEB EXERCISE

Go to www.coca-cola.com to see trademarks of the Coca-Cola Corporation.

In 1946, Congress enacted the Lanham (Trademark) Act , 8 commonly referred to as the Lanham Act, to provide federal protection to trademarks, service marks, and other marks. This act, as amended, is intended to (1) protect the owner’s investment and goodwill in a mark and (2) prevent consumers from being confused about the origin of goods and services.

Lanham (Trademark) Act (Lanham Act)

A federal statute that (1) establishes the requirements for obtaining a federal mark and (2) protects marks from infringement.

Registration of a Mark

Marks can be registered with the U.S. Patent and Trademark Office (PTO) in Washington DC. A registrant must file an application with the PTO wherein the registrant designates the name, symbol, slogan, or logo that he is requesting to be registered. A registrant must either prove that he has used the intended mark in commerce (e.g., actually used the mark in the sale of goods or services) or states that he intends to use the mark in commerce within six months from the filing of the application. In the latter case, if the proposed mark is not used in commerce within this six-month period, the applicant loses the right to register the mark. However, the applicant may file for a six-month extension to use the mark in commerce, which is often granted by the PTO.

The PTO provides for either the paper filing or the electronic filing of the application through its Trademark Electronic Application System (TEAS) . A party other than the registrant can submit an opposition to a proposed registration of a mark.

The PTO registers a mark if it determines that the mark does not infringe any existing marks, the applicant has paid the registration fee (approximately $375), and other requirements for registering the mark have been met.

Once the PTO has issued a registration of the mark, the owner is entitled to use the registered mark symbol ® in connection with a registered trademark or service mark. The symbol ® is used to designate marks that have been registered with the PTO. The use of the symbol ® is not mandatory, although it is wise to use the ®symbol to put others on notice that the trademark or service mark is registered with the PTO. Once a mark is registered, the mark is given nationwide effect, serves as constructive notice that the mark is the registrant’s personal property, and provides that federal lawsuits may be brought to protect the mark. The original registration of a mark is valid for 10 years, and it can be renewed for an unlimited number of 10-year periods.

®

A symbol that is used to designate marks that have been registered with the U.S. Patent and Trademark Office.

While the application is pending with the PTO, the registrant cannot use the symbol ®. However, during the application period, a registrant can use the symbol TM for goods or SM for services to alert the public to his or her legal claim. TM and SM may also be used by parties who claim a mark for goods or services but have not filed an application with the PTO to register the mark. In summary, TM and SM are used to designate unregistered trademarks and service marks, respectively.